You may recall from Fifth Circuit Update No. 3 my previous coverage of the Louisiana Real Estate Appraisers Board's battle with the Federal Trade Commission. See Louisiana Real Estate Appraisers Board v. FTC, 917 F.3d 389 (5th Cir. Feb. 28, 2019) (King, Higginson, Costa) (published per curiam) ("LREAB I"). Well, get ready for round two. Before digging into the Fifth Circuit's most recent opinion, I'll provide some background to refresh your memory and set the stage.
Background and LREAB I
The Board is a state agency that licenses and regulates real estate appraisers and management companies in Louisiana. It has ten members who are appointed by the Governor and confirmed by the Louisiana Senate. Members are removable by the Governor for cause. Of the ten members, eight must be licensed as certified real estate appraisers.
In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires lenders to compensate fee appraisers “at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” 15 U.S.C. §1639e(i)(1). In response, the Louisiana legislature amended Louisiana's Appraisal Management Company Licensing and Regulation Act (the “AMC Act”), to require that appraisal rates be consistent with Section 1639e and its implementing regulations. See La. Stat. Ann. §37:3415:15(A). The legislature also empowered the Board to “adopt any rules and regulations in accordance with the [Louisiana] Administrative Procedure Act necessary for the enforcement of [the AMC Act].” Id. §37:3415.21. The Board, in turn, adopted Rule 31101, requiring that licensees “compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised and as prescribed by La. Stat. Ann. § 34:3415.15(A).” La. Admin. Code tit. 46 § 31101.
Unlike the federal regulations, which make appraisal fees “presumptively” customary and reasonable if they meet certain market conditions, Rule 31101 prescribes its own methods by which a licensed appraisal management company can establish that a rate is customary and reasonable. Compare id., with 12 C.F.R. §226.42(f)(2), (3).
In 2017, the FTC filed an administrative complaint against the Board, alleging that Rule 31101 “unlawfully restrains competition [in violation of the FTC Act] by prohibiting [appraisal management companies] from arriving at an appraisal fee through the operation of the free market.” The FTC also alleged that the Board’s enforcement of Rule 31101 unlawfully restrained price competition. The Board denied the allegations and argued that it was entitled to immunity from antitrust liability under the state action doctrine.
In the meantime, the Governor of Louisiana issued an executive order purporting to enhance state oversight of the Board. The Board also revised Rule 31101 in accordance with the Governor’s executive order. Based on those changes, the Board moved to dismiss the FTC’s complaint in the administrative proceedings, arguing that these changes mooted the FTC’s claims. The same day, the FTC cross-moved for summary judgment on the Board’s state action immunity defense.
On April 10, 2018, the Commission denied the Board’s motion and granted the FTC’s, rejecting the Board’s assertion of state action immunity. Although the Commission hadn't issued a final cease and desist order, the Board sought immediate review of the April 10, 2018 order in the Fifth Circuit under the collateral-order doctrine.
In LREAB I, the Fifth Circuit held that while the collateral-order doctrine might permit immediate review of certain administrative decisions, it didn’t apply to the Commission's April 10, 2018 order denying the Board's claim to state action immunity. The panel explained that Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), the Supreme Court decision that established the collateral-order doctrine, “does not resolve this case.” Cohen, the panel reasoned, held that 28 U.S.C. §1291 permits collateral review of district court decisions, whereas the question in LREAB I was whether the FTC Act permits collateral review of the Commission’s decisions. Although courts have applied Cohen’s rationale to permit collateral review of administrative orders under the APA, the Mine Act, the Clean Air Act, and other statutes, the FTC Act’s judicial-review provision, which permits review in the court of appeals only of FTC cease-and-desist orders, is narrower than those statutes. Because “Congress has expressly limited our jurisdiction to review of cease-and-desist orders,” the Court explained, “we cannot consider the Board’s petition for review of the Commission’s denial of its motion to dismiss and granting of the FTC’s motion for partial summary decision.”
In reaching that conclusion, the Fifth Circuit expressly rejected the First Circuit’s holding that the collateral-order doctrine is “generally applicable” to administrative decisions. As the panel put it in its published per curiam opinion, “[t]he collateral-order doctrine may apply to judicial review of some administrative decisions,” but that doesn't mean that “courts of appeals may intervene in administrative proceedings as a general matter.”
On April 10, 2019, the Fifth Circuit denied the Board's petition for rehearing en banc. The very next day, Board challenged the April 10, 2018 order in federal court again, this time in federal district court, alleging the order violated the Administrative Procedure Act. The district court granted the Board’s motion and stayed the ongoing Commission proceedings pending resolution of the Board’s APA claim. The FTC appealed, arguing that the district court lacked jurisdiction.
The FTC argued that the district court lacked jurisdiction over the Board's lawsuit because the FTC Act vests exclusive jurisdiction to review challenges to Commission proceedings in the courts of appeals. 15 U.S.C. 45(d) ("Upon the filing of the record with it the jurisdiction of the court of appeals of the United States to affirm, enforce, modify, or set aside orders of the Commission shall be exclusive."). The Board countered that the district court had jurisdiction under the APA's default review provision, 5 U.S.C. 704, which says: "Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review."
The Fifth Circuit agreed with the FTC that the district court lacked jurisdiction, but not because the FTC Act precluded judicial review under Section 704 of the APA (an issue the panel didn't address). Instead, the Fifth Circuit held that the even if review under Section 704 were available, the Board had failed to meet Section 704's jurisdictional prerequisites--in particular, the "final agency action" requirement.
The Board had relied on the collateral-order doctrine again, arguing that the April 10, 2018 order met the doctrine's predicates and should therefore be treated as final and subject to APA review. The Fifth Circuit disagreed.
The panel opinion, written by Judge Jones and joined by Judges Elrod Higginson, begins with an explanation of how the collateral-order doctrine interacts with the "final agency action" requirement of Section 704 of the APA:
There was no dispute that the Commission's rejection of state action immunity was "conclusive" for purposes of the first prong of the three-part test above. The parties' focused instead on prongs two and three: whether the issue of state action immunity was "completely separate from the merits" of the FTC's antitrust action and whether the decision was "effectively unreviewable on appeal."
The panel's resolution of the jurisdictional question involves a relatively deep dive into the fineries of state-action immunity--a doctrine with which I confess I'm not at all familiar. In case you're in the same boat, I'll attempt to summarize the Court's helpful discussion of the origins and nuances of the doctrine.
State-action immunity isn't really "immunity" at all. Instead, it's shorthand for a recognized limitation on the reach of the Sherman Act and the FTC Act that traces its origins to Parker v. Brown, 317 U.S. 341 (1943), which held that the Sherman Act doesn't reach state regulatory programs. Since then, courts have extended the doctrine to shield the actions of private entities proceeding under state authority from federal antitrust scrutiny, but only when two conditions are met: (1) the challenged restraint is clearly articulated and affirmatively expressed as state policy and (2) the anticompetitive conduct is actively supervised by the State itself. These two requirements are often called the Midcal prongs--a label taken from California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), the Supreme Court decision that announced them. A subsequent Supreme Court case, Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985), clarified that municipalities and other political subdivisions need only satisfy the first Midcal prong to qualify for state-action immunity.
After discussing the origins of the doctrine, the panel discusses Fifth Circuit precedent applying it. Having completed that summary, the panel explains that none of those prior cases is particularly helpful in resolving the jurisdictional issue in this case because none of those cases involved (1) a party invoking the collateral-order doctrine as an "appendage" of Section 704 to interfere with an ongoing federal regulatory proceeding; (2) an action initiated by a federal agency; or (3) issues addressed by the Supreme Court's relatively recent decision in North Carolina State Board of Dental Examiners v. FTC, 574 U.S. 494 (2015).
Starting with the implications of Dental Examiners, the panel explains that in that case, the Court applied the Midcal factors to address concerns about placing private practitioners in regulatory agencies, emphasizing that “[l]imits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern.” Id. at 504. Hence, it was necessary to apply Midcal’s active-supervision prong, which “demands ‘realistic assurance that a private party’s anticompetitive conduct promotes state policy, rather than merely the party’s individual interests.’” Id. at 507 (cites omitted).
The Board argued that it was nevertheless entitled to immunity from suit as a state agency, not a “purely private part[y].” The panel was unpersuaded, and noted that the Supreme Court has "rejected such a 'purely formalistic inquiry.'” (quoting Town of Hallie, 471 U.S. at 39. Instead, in Dental Examiners, the Court distinguished “specialized boards dominated by active market participants” from “prototypical state agencies” because of the private incentives inherent in their structure. Id. at 511. Such “agencies controlled by market participants are more similar to private trade associations vested by States with regulatory authority ....” Id. "Thus," the panel concluded, "while the Board may rightly defend its entitlement to state action immunity, it invokes the state action doctrine as a private party."
Next, the panel explained that the fact that the FTC had initiated this regulatory case was "[a]nother reason for rejecting the Board's quest for collateral review." "Even if the Board were a sovereign actor," the panel emphasized, "States retain no sovereign immunity as against the Federal Government." (quoting West Virginia v. United States, 455 U.S. 305, 312 n.4 (1987)).
As a result, the panel held that "case law does not support jurisdiction based on the collateral order doctrine as applied through Section 704 of the APA."
After explaining in a footnote that the April 10, 2018 order also wasn't final under the two-part test announced in Bennett v. Spear, 520 U.S. 154, 177-78 (1997), the panel vacated the district court's stay order and remanded with instructions that the district court dismiss the Board's suit for lack of jurisdiction.